3 Graphs on Companies’ Demand for Credit in the Euro Area

The ECB survey on banks’ lending conditions is very instructive in October. It gives a positive signal on the funding of the Euro economy through the banking sector. Behaviors have changed in 2014 even if this is not yet transformed in real on the growth economic momentum.
A focus will be put on companies as the change in trend will come from them.
Three questions
The first in on credit demand
Companies, small or large, have a demand that is getting stronger all over 2014. To ease the reading of the chart, 0 is the historical level. We see that demand is now well above this threshold.
Credit demand is now better shaped; expectations are stronger Continue reading

3 graphs on the weaker momentum of the Euro Area

Investors seem to have perceived a possible improvement in the economic momentum in the Euro Area after the publication of the Markit survey for October. That was one reason for markets stronger dynamics. I think they are wrong. The economic situation is not improving in the Euro Area.
3 graphs to perceive this weaker momentum

In the first chart I build a synthetic index for the whole economy that is based on synthetic indices from the manufacturing and the service surveys*. The synthetic index for the whole economy is weighted average of the two sub-indices. The weight is employment in each sub-sector (I have the same profile if I use added value).
The index reflects activity (which is what is usually taken as the synthetic index), employment, backlog orders and flows of new orders.
In October, this index is still trending downward Continue reading

A change in global growth expectations ?

Financial market fluctuations have intensified recently. This can be seen in both the equity markets and the bond markets, where the abrupt but temporary dip in the U.S. 10-year Treasury yield below 2% is a strong signal for a possible change in policy.

These financial market movements began the day after Janet Yellen’s September 17 press conference. She remained vague on the timing of any increase in the Fed’s rates, thus creating uncertainty and raising questions about the U.S. central bank’s commitment to a swift change in its monetary strategy. According to the chairman of the Federal Reserve, it would not be advisable to act too quickly as long as imbalances remain in the economy. In general, the takeaway from her comments is that it is likely preferable to act a little too late than a little too soon, which explains why she has no interest in setting overly specific objectives for the actual direction of her monetary policy. Continue reading